1     
WATER SUPPLY AMENDMENTS

2     
2022 GENERAL SESSION

3     
STATE OF UTAH

4     
Chief Sponsor: Phil Lyman

5     
Senate Sponsor: ____________

6     

7     LONG TITLE
8     General Description:
9          This bill addresses a municipality's supply of water to contract water customers.
10     Highlighted Provisions:
11          This bill:
12          ▸     defines terms;
13          ▸     describes the process by which a municipality provides water to contract water
14     customers;
15          ▸     addresses providing water to certain subdivisions;
16          ▸     addresses terms of contracts;
17          ▸     addresses rates for contract water customers;
18          ▸     requires the state engineer to post certain maps; and
19          ▸     makes technical changes.
20     Money Appropriated in this Bill:
21          None
22     Other Special Clauses:
23          None
24     Utah Code Sections Affected:
25     AMENDS:
26          10-8-14, as last amended by Laws of Utah 2019, Chapter 99
27          10-8-22, as last amended by Laws of Utah 2019, Chapter 99

28          73-5-16, as enacted by Laws of Utah 2019, Chapter 99
29     ENACTS:
30          10-7-14.5, Utah Code Annotated 1953
31     

32     Be it enacted by the Legislature of the state of Utah:
33          Section 1. Section 10-7-14.5 is enacted to read:
34          10-7-14.5. Rules and regulations for use of contract water.
35          (1) As used in this section:
36          (a) "Adequate" means that the water is sufficient in quantity and flow rate to meet
37     county or municipal public health and public safety code requirements, including sufficient
38     water to meet fire flow requirements.
39          (b) "Contract water" means water provided to a contract water customer from a
40     municipality's surplus water.
41          (c) "Contract water customer" means an end user:
42          (i) who receives water for culinary purposes or fire suppression purposes from a
43     municipality's surplus water under a contract or permit;
44          (ii) who lives outside of the municipality's designated water service area; and
45          (iii) whom the municipality described in Subsection (1)(c)(i) does not bill for water
46     service.
47          (d) "Contract water service area" means an area, defined by ordinance, where:
48          (i) a municipality provides water outside of the municipality's designated water service
49     area; and
50          (ii) the municipality does not own or provide the means of water service delivery.
51          (e) "Designated water service area" means the area defined by a municipality in
52     accordance with the Utah Constitution, Article XI, Section 6, Subsection (1)(c).
53          (f) "Fire flow" means the minimum amount of water, or rate of water flow, required to
54     fight a fire as adopted in statute including under Title 15A, State Construction and Fire Codes
55     Act.
56          (g) "Retail customer" means an end user:
57          (i) who receives culinary water or fire flow directly from a municipality's waterworks
58     system; and

59          (ii) whom the municipality described in Subsection (1)(g)(i) bills for water service.
60          (h) "Surplus water" means water from a water right owned by a municipality that is in
61     excess of the water needed by the municipality to serve the retail customers within the
62     municipality's designated water service area.
63          (i) "Water for culinary purposes" means adequate surplus water:
64          (i) that is contract water;
65          (ii) that is culinary water; and
66          (iii) for which the municipality owns the water right, but does not own or provide the
67     means of water delivery including treatment of water, storage, and distribution facilities, pipes,
68     hydrants, or appurtenances to a pipe or hydrant.
69          (2) Subject to this section, a municipality may enact ordinances, and rules and
70     regulations for the management and conduct of the contract water owned or controlled by the
71     municipality.
72          (3) A municipality that provides contract water to a contract water customer shall:
73          (a) provide adequate year-round water for culinary purposes or for fire flow purposes to
74     a residence of the contract water customer in which the contract water customer resides
75     year-round;
76          (b) create and maintain a map, that may be combined with the map required by
77     Subsection 10-7-14(3), showing:
78          (i) the municipality's designated water service area; and
79          (ii) each area outside the municipality's designated water service area where a contract
80     water customer receives water for culinary purposes or fire flow purposes from the
81     municipality;
82          (c) transmit a copy of the map described in Subsection (3)(b) to the state engineer;
83          (d) if the municipality's contract water is used to serve more than 500 end users, post
84     the map described in Subsection (3)(b) on the municipality's website;
85          (e) define, by ordinance, an area that is the municipality's contract water service area;
86          (f) adopt, by ordinance, contract, or contract amendment a municipality rule or
87     regulation applicable to a contract water customer located within the municipality's contract
88     water service area; and
89          (g) adopt, by ordinance or contract and in accordance with Section 10-8-22, reasonable

90     water rates for contract water customers in the municipality's contract water service area.
91          (4) Within the municipality's contract water service area, a municipality shall:
92          (a) provide adequate service to contract water customers in a manner consistent with
93     principles of equal protection; and
94          (b) apply restrictions on water use to contract water customers in times of anticipated
95     or actual water shortages in a manner consistent with principles of equal protection.
96          (5) (a) In addition to complying with Subsection (3)(a), unless year-round residency is
97     prohibited by local zoning ordinances, a municipality shall provide a contract water customer
98     year-round access to contract water.
99          (b) In an area where retail water service is not provided by a municipality that owns
100     70% or more of the water rights for that area, the municipality may not deny water to a lot
101     owner within a platted subdivision in that area if:
102          (i) the platted subdivision has been approved;
103          (ii) one or more lots in the platted subdivision have been developed;
104          (iii) one or more of the lots in the subdivision have been granted contract water by the
105     municipality; and
106          (iv) the owner of the lot proposes to develop the lot in compliance with the land use
107     regulations generally applicable to the platted subdivision.
108          (c) If a municipality refuses to provide water to a lot in violation of Subsection (5)(b),
109     the refusal is a taking and the municipality shall:
110          (i) follow takings law, as defined in Section 63L-3-102; and
111          (ii) purchase the lot.
112          (6) Nothing in this section:
113          (a) prohibits a municipality from enacting a service restriction or other restriction:
114          (i) affecting:
115          (A) a localized area; or
116          (B) the municipality's entire designated water service area or contract water service
117     area; and
118          (ii) (A) based on an operational or maintenance need;
119          (B) based on an emergency situation; or
120          (C) to address a health, safety, or general welfare need;

121          (b) expands or diminishes the ability of a municipality to enter into a contract to supply
122     water outside of the municipality's designated water service area; or
123          (c) alters the authorities or definitions described in Title 19, Chapter 4, Safe Drinking
124     Water Act.
125          Section 2. Section 10-8-14 is amended to read:
126          10-8-14. Utility and telecommunications services -- Service beyond municipal
127     limits -- Retainage -- Notice of service and agreement.
128          (1) As used in this section, "public telecommunications service facilities" means the
129     same as that term is defined in Section 10-18-102.
130          (2) A municipality may:
131          (a) construct, maintain, and operate waterworks, sewer collection, sewer treatment
132     systems, gas works, electric light works, telecommunications lines, cable television lines,
133     public transportation systems , or public telecommunications service facilities ;
134          (b) authorize the construction, maintenance and operation of the works or systems
135     listed in Subsection (2)(a) by others;
136          (c) purchase or lease the works or systems listed in Subsection (2)(a) from any person
137     or corporation; and
138          (d) sell and deliver the surplus product or service capacity of any works or system
139     listed in Subsection (2)(a), not required by the municipality or the municipality's inhabitants, to
140     others beyond the limits of the municipality, except the sale and delivery of:
141          (i) retail electricity beyond the municipal boundary is governed by Subsections (3)
142     through (8);
143          (ii) cable television services or public telecommunications services is governed by
144     Subsection (12); and
145          (iii) water is governed by Sections 10-7-14, 10-7-14.5, and 10-8-22.
146          (3) If any payment on a contract with a private person, firm, or corporation to construct
147     waterworks, sewer collection, sewer treatment systems, gas works, electric works,
148     telecommunications lines, cable television lines, public transportation systems , or public
149     telecommunications service facilities is retained or withheld, it shall be retained or withheld
150     and released as provided in Section 13-8-5.
151          (4) (a) Except as provided in Subsection (4)(b), (6), or (10), a municipality may not sell

152     or deliver the electricity produced or distributed by the municipality's electric works
153     constructed, maintained, or operated in accordance with Subsection (2) to a retail customer
154     located beyond the municipality's municipal boundary.
155          (b) A municipality that provides retail electric service to a customer beyond the
156     municipality's municipal boundary on or before June 15, 2013, may continue to serve that
157     customer if:
158          (i) on or before December 15, 2013, the municipality provides the electrical
159     corporation, as defined in Section 54-2-1, that is obligated by the municipality's certificate of
160     public convenience and necessity to serve the customer with an accurate and complete verified
161     written notice described in Subsection (4)(c) that identifies each customer served by the
162     municipality beyond the municipality's municipal boundary;
163          (ii) no later than June 15, 2014, the municipality enters into a written filing agreement
164     for the provision of electric service with the electrical corporation; and
165          (iii) the Public Service Commission approves the written filing agreement in
166     accordance with Section 54-4-40.
167          (c) The municipality shall include in the written notice required in Subsection (4)(b)(i)
168     for each customer:
169          (i) the customer's meter number;
170          (ii) the location of the customer's meter by street address, global positioning system
171     coordinates, metes and bounds description, or other similar method of meter location;
172          (iii) the customer's class of service; and
173          (iv) a representation that the customer was receiving service from the municipality on
174     or before June 15, 2013.
175          (5) The written filing agreement entered into in accordance with Subsection (4)(b)(ii)
176     shall require the following:
177          (a) The municipality shall provide electric service to a customer identified in
178     accordance with Subsection (4)(b)(i) unless the municipality and the electrical corporation
179     subsequently agree in writing that the electrical corporation will provide electric service to the
180     customer.
181          (b) If a customer who is located outside the municipal boundary and who is not
182     identified in accordance with Subsection (4)(b)(i) requests service from the municipality after

183     June 15, 2013, the municipality may not provide that customer electric service unless the
184     municipality submits a request to and enters into a written agreement with the [electric]
185     electrical corporation in accordance with Subsection (6).
186          (6) (a) A municipality may submit to the electrical corporation a request to provide
187     electric service to an electric customer described in Subsection (5)(b).
188          (b) If a municipality submits a request, the electrical corporation shall respond to the
189     request within 60 days.
190          (c) If the electrical corporation agrees to allow the municipality to provide electric
191     service to the customer:
192          (i) the electrical corporation and the municipality shall enter into a written agreement;
193          (ii) the municipality shall agree in the written agreement to subsequently transfer
194     service to the customer described in Subsection (5)(b) if the electrical corporation notifies, in
195     writing, the municipality that the electrical corporation has installed a facility capable of
196     providing electric service to the customer; and
197          (iii) the municipality may provide the service if:
198          (A) except as provided in Subsection (6)(c)(iii)(B), the Public Service Commission
199     approves the agreement in accordance with Section 54-4-40; or
200          (B) for an electrical cooperative that meets the requirements of Subsection 54-7-12(7),
201     the governing board of the electrical cooperative approves the agreement.
202          (d) The municipality or the electrical corporation may terminate the agreement for the
203     provision of electric service if the Public Service Commission imposes a condition authorized
204     in Section 54-4-40 that is a material change to the agreement.
205          (7) If the municipality and electrical corporation make a transfer described in
206     Subsection (6)(c)(ii):
207          (a) (i) the municipality shall transfer the electric service customer to the electrical
208     corporation; and
209          (ii) the electrical corporation shall provide electric service to the customer; and
210          (b) the municipality shall transfer a facility in accordance with and for the value as
211     provided in Section 10-2-421.
212          (8) (a) In accordance with Subsection (8)(b), the municipality shall establish a
213     reasonable mechanism for resolving potential future complaints by an electric customer located

214     outside the municipality's municipal boundary.
215          (b) The mechanism shall require:
216          (i) that the rates and conditions of service for a customer outside the municipality's
217     boundary are at least as favorable as the rates and conditions of service for a similarly situated
218     customer within the municipality's boundary; and
219          (ii) if the municipality provides a general rebate, refund, or other payment to a
220     customer located within the municipality's boundary, that the municipality also provide the
221     same general rebate, refund, or other payment to a similarly situated customer located outside
222     the municipality's boundary.
223          (9) The municipality is relieved of any obligation to transfer a customer described in
224     Subsection (5)(b) or facility used to serve the customer in accordance with Subsection (6)(c)(ii)
225     if the municipality annexes the property on which the customer is being served.
226          (10) (a) A municipality may provide electric service outside of the municipality's
227     municipal boundary to a facility that is solely owned and operated by the municipality for
228     municipal service.
229          (b) A municipality's provision of electric service to a facility that is solely owned and
230     operated by the municipality does not expand the municipality's electric service area.
231          (11) Nothing in this section expands or diminishes the ability of a municipality to enter
232     into a wholesale electrical sales contract with another municipality that serves electric
233     customers to sell and deliver wholesale electricity to the other municipality.
234          (12) A municipality's actions under this section related to works or systems involving
235     public telecommunications services or cable television services are subject to the requirements
236     of Chapter 18, Municipal Cable Television and Public Telecommunications Services Act.
237          Section 3. Section 10-8-22 is amended to read:
238          10-8-22. Water rates.
239          (1) As used in this section:
240          (a) "Contract water customer" means the same as that term is defined in Section
241     10-7-14.5.
242          (b) "Contract water service area" means the same as that term is defined in Section
243     10-7-14.5.
244          [(a)] (c) "Designated water service area" means the area defined by a municipality in

245     accordance with the Utah Constitution, Article XI, Section 6, Subsection (1)(c).
246          [(b)] (d) "Large municipal drinking water system" means a municipally owned and
247     operated drinking water system serving a population of 10,000 or more.
248          [(c)] (e) "Retail customer" means an end user:
249          (i) who receives culinary water directly from a municipality's waterworks system; and
250          (ii) whom the municipality described in Subsection (1)[(c)](e)(i) bills for water service.
251          (2) A municipality shall fix the rates to be paid for the use of water furnished by the
252     municipality.
253          (3) The setting of municipal water rates is a legislative act.
254          (4) (a) Within the municipality's designated water service area, a municipality shall:
255          [(a)] (i) establish, by ordinance, reasonable rates for the services provided to the
256     municipality's retail customers;
257          [(b)] (ii) use the same method of providing notice to all retail customers of proposed
258     rate changes; and
259          [(c)] (iii) allow all retail customers the same opportunity to appear and participate in a
260     public meeting addressing water rates.
261          (b) (i) Within a municipality's contract water service area, the municipality shall
262     establish by ordinance or contract reasonable rates for contract water customers.
263          (ii) A municipality shall provide by ordinance or contract a method whereby a contract
264     water customer may participate in a public meeting addressing water rates.
265          (5) (a) A municipality may establish different rates for different classifications of retail
266     customers within the municipality's designated water service area, if the rates and
267     classifications have a reasonable basis.
268          (b) A reasonable basis for charging different rates for different classifications may
269     include, among other things, a situation in which:
270          (i) there is a difference in the cost of providing service to a particular classification;
271          (ii) one classification bears more risk in relation to a system operation or obligation;
272          (iii) retail customers in one classification invested or contributed to acquire a water
273     source or supply or build or maintain a system differently than retail customers in another
274     classification;
275          (iv) the needs or conditions of one classification:

276          (A) are distinguishable from the needs or conditions of another classification; and
277          (B) based on economic, public policy, or other identifiable elements, support a
278     different rate; or
279          (v) there is a differential between the classifications based on a cost of service standard
280     or a generally accepted rate setting method, including a standard or method the American
281     Water Works Association establishes.
282          (c) An adjustment based solely on the fact that a particular classification of retail
283     customers is located either inside or outside of the municipality's corporate boundary is not a
284     reasonable basis.
285          (6) (a) If more than 10% of the retail customers within a large municipal drinking water
286     system's designated water service area are located outside of the municipality's corporate
287     boundary, the municipality shall:
288          (i) post on the municipality's website the rates assessed to retail customers within the
289     designated water service area; and
290          (ii) establish an advisory board to make recommendations to the municipal legislative
291     body regarding water rates, capital projects, and other water service standards.
292          (b) In establishing an advisory board described in Subsection (6)(a)(ii), a municipality
293     shall:
294          (i) if more than 10% but no more than 30% of the municipality's retail customers
295     receive service outside the municipality's municipal boundary, ensure that at least 20% of the
296     advisory board's members represent the municipality's retail customers receiving service
297     outside the municipality's municipal boundary;
298          (ii) if more than 30% of the municipality's retail customers receive service outside of
299     the municipality's municipal boundary, ensure that at least 40% of the advisory board's
300     members represent the municipality's retail customers receiving service outside of the
301     municipality's municipal boundary; and
302          (iii) in appointing board members who represent retail customers receiving service
303     outside of the municipality's municipal boundary, as required in Subsections (6)(b)(i) and (ii),
304     solicit recommendations from each municipality and county outside of the municipality's
305     municipal boundary whose residents are retail customers within the municipality's designated
306     water service area.

307          (7) (a) [A] Subject to Section 10-7-14.5, a municipality that supplies water outside of
308     the municipality's designated water service area shall supply the water only by contract and
309     shall include in the contract the terms and conditions under which the contract can be
310     terminated.
311          (b) A municipality may establish, by ordinance or contract, different rates for different
312     classifications of contract water customers, if the rates and classifications have a reasonable
313     basis.
314          (c) A reasonable basis for charging different rates for different classifications may
315     include, among other things, a situation in which:
316          (i) there is a difference in the cost of providing service to a particular classification;
317          (ii) one classification bears more risk in relation to a system operation or obligation;
318          (iii) contract water customers in one classification invested or contributed to acquire a
319     water source or supply or build or maintain a system differently than contract water customers
320     in another classification;
321          (iv) the needs or conditions of one classification:
322          (A) are distinguishable from the needs or conditions of another classification; and
323          (B) based on economic, public policy, or other identifiable elements, support a
324     different rate; or
325          (v) there is a differential between the classifications based on a cost of service standard
326     or a generally accepted rate setting method, including a standard or method the American
327     Water Works Association establishes.
328          (8) A municipality shall:
329          (a) notify the director of the Division of Drinking Water of a contract the municipality
330     enters into with a person outside of the municipality's designated water service area, including
331     the name and contact information of the person named in each contract; and
332          (b) each year, provide any supplementing or new information regarding a contract
333     described in Subsection (8)(a), including whether there is no new information to provide at that
334     time.
335          Section 4. Section 73-5-16 is amended to read:
336          73-5-16. State engineer to publish maps.
337          The state engineer shall publish conspicuously on the state engineer's website a map a

338     municipality submits in accordance with Subsection [10-7-14(3)(a)] 10-7-14(3)(b) or
339     10-7-14.5(3)(c).